Overview
- The Bundesbank presented its Financial Stability Report on Thursday, November 12 and judged risks to be elevated because high market valuations, rising problem loans, weak commercial and residential real‑estate and growing euro‑area public debt are now closely linked.
- German banks still show solid earnings, capital and liquidity today, but the Bundesbank warns that higher corporate insolvencies and a rising share of non‑performing loans since mid‑2025 could quickly erode that resilience in a worse macroeconomic scenario.
- New mortgage data for Q2 2026 point to vulnerabilities: nearly 40% of new residential lending had loan‑to‑value ratios above 90% and about 11% of loans exceeded the property value, raising household and bank loss risk if incomes fall or prices drop.
- The report flags non‑bank finance as a key transmission channel, noting outflows and suspended redemptions in open real‑estate funds and the rapid rise of opaque private‑credit funds that are increasingly linked to banks, insurers and pension funds.
- To reduce systemic spillovers the Bundesbank calls for regulators to make capital buffers actually usable, tighten macroprudential rules including limits or capital charges for concentrated sovereign holdings, and improve European data and transparency for non‑bank intermediaries.